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From Banking and Finance Law Daily, October 13, 2016

Garrett questions Yellen about Fed governors’ political activity

By Thomas G. Wolfe, J.D.

As a follow-up to a September 2016 House Financial Services Committee hearing, Rep. Scott Garrett (R-NJ) has submitted a letter to Federal Reserve Board Chair Janet Yellen expressing his concerns about conflicts of interest that could arise for Federal Reserve governors or members of the Federal Open Market Committee, especially when they are "openly engaging in political activity." With this political activity in mind, Garrett poses several detailed questions to Yellen in his Oct. 12, 2016, letter, not only on the independence and transparency of the Fed’s monetary policy but also on whether Fed governors or FOMC members should recuse themselves from voting and decision-making under described scenarios.

According to Garrett’s recent release, Fed Governor Lael Brainard made a political contribution—the maximum allowable amount—to "Hillary for America," and Brainard "is on the ‘short list’ for a high-level position in a potential Clinton Administration, including possibly Treasury Secretary."

In his letter, Garrett asserts that "the mere appearance of an unresolved conflict or impropriety on the part of a sitting Federal Reserve governor could destroy confidence in an institution that is already viewed with great skepticism by the American public."

Questions. While some of Garrett’s questions to Yellen reference Brainard by name and her personal circumstances, other questions are more generic in nature. For example, Garrett asks:

  • Do you believe that the Federal Reserve’s monetary policy independence is in any way compromised in the eyes of the public when a sitting governor—or any member of the FOMC—contributes to a political campaign?

  • Do you believe there is any scenario where FOMC members should recuse themselves from participating or voting in FOMC meetings if they contribute to political campaigns while they are members of the FOMC?

  • Do you believe FOMC members should recuse themselves from participating or voting in FOMC meetings if they have been in discussions or negotiations for high-level Executive Branch positions in a current or future administration while they are members of the FOMC?

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